08/31/2023
Under the expectation of industry recovery, many investors hope that the aviation industry can continue its recent gains in the second half of this year. According to various data, airlines are seeing better-than-expected leisure and corporate demand, and a modest decline in fuel costs has also eased pressure on the industry. Delta Air Lines (DAL.US) sparked an industry-wide rally in late June after it issued an exciting new guidance ahead of the second-quarter earnings season.
Despite record levels of travel over the busy Fourth of July holiday weekend, flight delays and cancellations have generated some negative headlines and disgruntled passengers. These developments are likely to add to the focus on booking trends, which have been mixed for the industry over the past month.
Bank of America reported that airline bookings rebounded after the June 1 holiday, with system net sales up 4.0% for the week ended June 25 compared to the same period in 2019. Transaction volume also accelerated month-on-month, while ticket prices declined. However, on average over the past two weeks, system net sales were down 4.4% from the same period in 2019, down from -2.6% in the prior two weeks. “In addition to holiday-related volatility, we note that all channels have followed a generally consistent downward trend since May,” BofA warned.
In terms of stock price performance, Air West (SKYW.US) is the airline with the largest increase in the first half of this year, with an increase of 147%, Loyalty Travel (ALGT.US) rose 86%, while United Airlines (UAL.US) and Delta American Airlines (AAL.US), JetBlue Airways (JBLU.US) and Alaska Airways (ALK.US) are all up about 45% over the past six months. At the industry level, the return of the aviation ETF-U.S.Global in the first half of the year was 26%, which was higher than the average level of the broader market.
